National Institute of Economic and Social Research

Friday, 13 April 2012

Stuck on the dole: why has long-term JSA receipt among young people tripled in less than a year?

[Figures in this paragraph, and chart, updated April 19, 2012]

As recently as 2008 there were fewer than 6,000 18-24 year olds who had been on Jobseekers' Allowance for more than a year. That number is now 55,000 - nearly ten times as many. This is not just the recession and its aftermath: after falling back somewhat in the year to May 2011, the number has more than tripled, as shown in the chart below. The same is true for the proportion of claimants who have been claiming for more than a year.

In some regions, the figures are even worse - the North-East and South-West have seen a five-fold increase.

This is astonishing. For comparison, the total number of people claiming JSA has gone up by only 8%; the number of 18-24 year olds by 12%. Long-term JSA receipt among prime-age workers has increased substantially, as Tony Wilson points out in an excellent and detailed analysis here, but still not by anything like these amounts. Moreover, these sharp increases in long-term benefit receipt don't appear to reflect developments in the wider labour market. While youth unemployment as measured by the wider Labour Force Survey (LFS) measure has increased - and remains at unacceptably, and unnecessarily, high levels - the increase since last year is much more muted. Long-term youth unemployment has hardly risen at all. [See note at end for explanation of the differences between the JSA measure and the LFS one].

So what is going on? Two factors that have affected the JSA statistics more generally, but seem unlikely to be driving this phenomenon, are changes to eligibility for Income Support (lone parents) and for Employment and Support Allowance (people unable to work because of illness or disability). The former affects lone parents with older children, who are unlikely to be in this age group, while young people do not represent a large share of the ESA caseload.

So it seems clear that the JSA system is becoming much less efficient at preventing young people from getting "stuck" on benefit (again, Tony's analysis discusses the possible explanations). In part, this reflects the ending of the Future Jobs Fund (FJF) and the sharp reduction in the number of people on training allowances. This can be seen in published DWP data here and here. I have argued before, although there were clearly design issues with FJF, the Government's decision to cancel it at a time of high and rising youth unemployment, without waiting for proper evaluation evidence of its effectiveness, was a major and avoidable policy mistake. These data seem to provide further evidence to that effect.

Even more worrying, though, is what the data may indicate about the effectiveness of the government's Work Programme for this group. The Work Programme is the government's flagship policy in this area, and is supposed to be the main answer to long-term youth unemployment. But the sharp rise in the chart coincides almost exactly with its introduction June 2011. It seems reasonably clear that, as yet, the Work Programme is not working for young long-term JSA claimants (Ian Mulheirn's blog here suggests this is also true for the over-25s). This could be for a number of reasons:

teething problems (new welfare to work programmes generally take a few months to settle down, but the sheer scale of the increase suggests it is more than that);

incentives; it may be that, given the poor state of the youth labour market, providers are not finding it profitable to work with young people compared to other categories of Work Programme participants, such as ESA claimants, who are potentially much more profitable. If so, this is a major design flaw;

broader problems with the Work Programme; as yet we have no meaningful overall performance data, and it will not be published until the autumn.

It is noticeable in the data that the one region of the UK that appears largely unaffected by these trends is Northern Ireland, where long-term JSA receipt among young people has been fairly flat: Northern Ireland is not directly affected by the changes to labour market programmes described above.

Whatever the reason, this situation is clearly unacceptable; the government needs to investigate what is going on and explain what action it proposes to take. It is far from clear what, if anything, in the government's Youth Contract will address this issue. It should adopt the recommendation of the independent Commission on Youth Unemployment (a version of which was subsequently adopted by the Labour Party) which suggested:

"After one year looking for work on the Work Programme, young people should have access to a part-time ‘First Step’ job guarantee – combined with responsibilities for job search and preparation."

This would by no means solve all the problems associated with long-term youth unemployment, as the Commission's report makes clear. But at the moment things seem to be getting rapidly worse.

Note: JSA and LFS

Statistics on the number of people on JSA - often referred to as the "claimant count" - just reflect people claiming benefit. The claimant count is an accurate, up-to-date, administrative measure, but, by definition, only measures those who actually claim, which excludes many people who are in fact unemployed. Many people who are looking for work aren't eligible for JSA (they might have too much income or a working partner, they might be students, or they might, especially if young, have dropped out of the system entirely). So the standard, and internationally comparable measure, of unemployment is taken from the Labour Force Survey, which asks people if they are looking for, and available for, work, regardless of their benefit status. The ONS explains the differences here.

There are two things I came across today that may be part of an explanation. In Waltham Forest the number of apprentices the council takes on directly has halved, where the number was rising before.

This has knock on problems because private employers are less able or willing to deal with jobseekers who have additional problems getting into the Labour market i.e. they are vulnerable, have certain disabilities or behavioural problems that need to be addressed.

Secondly the number of apprenticeships in the construction industry has dropped off significantly in the area (and across London) which seems to be creating a particular problem for young men looking for practical apprenticeships. There are things that can be done but they are either not being implemented or the money isn't there.